HDFC - Pressure continues to build on spreads - Emkay

HDFC Q2FY13 NII at Rs12.9bn (+11% yoy) – below estimates. However with higher dividend income and investment gains, rep. PAT at Rs11.5bn (+19% yoy) – inline with estimates.

- Calc spreads decline 28bps on back of lower yields and rise in costs. Maintaining NIM remains a challenge in H2FY13 due to easing yields. Reported spreads remain stable qoq.

- Loan growth/sanctions/disburse. remain strong at 22%/19%/22% resp. Repayments in line with historical seasonality for Q2 despite no foreclosure charges.

- With rising competitive intensity and consequent pressure on NIMs current valuations leave limited room for upside. Assign REDUCE rating with target price of Rs700.

Source : Equity Bulls

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